Banking, insurance and financial services changes after Brexit

The United Kingdom (UK) left the European Union (EU) on 31 January 2020.

The UK’s future relationship with the EU has now in most part been determined by a new agreement it has negotiated with the EU on trade and other areas of co-operation and the provisions outlined in the Northern Ireland protocol.

Overview of what’s changing

The UK will continue to follow the EU rules transferred into UK law through the EU Withdrawal Act 2018,{:target=”_blank”} although the government will retain the capacity to diverge should it later decide to introduce changes in UK law.

Passporting rights have now ceased and the transition period has come to an end. Passporting refers to the regulation of financial services, allowing UK firms to continue to do business throughout the EU without the need for further authorisation.

EEA firms currently operating through a passport in the UK under the existing European passport framework will require a Part 4A permission under the Financial Services and Markets Act (FSMA) to be able to continue carrying out regulated activities in the UK. This has led to HM Treasury legislating for a Temporary Permissions Regime (TPR) which has now taken effect.

The aim of the TPR is to allow firms not based in the UK to continue carrying out business in the UK for a limited period while they seek authorisation from UK regulators. Your financial services provider should contact you if the financial product or the service they are able to offer may be impacted.

However, when dealing with a firm from the European Economic area (EEA) that is seeking authorisation from the Prudential Regulation Authority (PRA) while in the TPR, it’s possible you might not be covered in the same way as a UK based firm when making a complaint or seeking compensation. Your provider should tell you if you are affected in any way.

Will I still be able to send or pay in Euros electronically?

Yes, the UK has maintained its participation in the Single Euro Payments Area (SEPA). This means you’ll be able to continue to send or pay in Euros electronically. However, you might find the time taken to process any Euro payments and transfers will increase. If you need to make a payment by a fixed deadline, it might be a good idea to leave some extra time to have the payment processed.

Since 1 January 2021, banks and other types of payment service providers (PSPs) now have to provide additional information when making certain payments between the UK and the EEA. This includes the name of the payer and payee, and address of the payer. If they don’t provide this information, it’s possible some payments, including Direct Debits, may be disrupted.

If your payments could be disrupted, your service provider should get in touch with you.

Can I still make a cash withdrawal in the EEA?

Yes you can still make cash withdrawals in the EEA. However, these might be more expensive in the future. Your service provider should let you know about any changes in fees and charges that could affect products you have with them.

I have a UK bank account. Will I be able to use my card to pay merchants in the EEA?

Yes, should not be impacted now the UK has left the EU and the transition period has ended. This is also the case if you have a bank account with a provider based in the EU or the EEA and want to use your bank card in the UK.

Existing consumer rights and protections will continue to apply when using your card for payment of goods and services.

I live in the UK. How will my insurance policies, personal pensions, annuities or other financial products from firms based in the EAA be affected now the UK has left the EU?

Your coverage or product should not change because the UK has now left the EU.

The UK has negotiated its future relationship with the EU and has now put in place a Temporary Permissions Regime (TPR) to allow EEA providers to operate in the UK while they seek permanent authorisation.

Further legislation was additionally made for a Financial Services Contract Regime (FSCR) to enable firms that do not enter the temporary permissions regime to wind down their UK business in an orderly fashion.

If you’d like advice about a financial product, you should consider speaking to a qualified financial adviser.

Visit the FCA’s website for its guide Brexit: information for retail investments firms in the UK.

Will the terms and conditions of my insurance policies now change?

Your provider will tell you if your products are affected in any way. However, you should contact your product provider directly if you have any concerns about your policy or the service they offer. When the time comes to renew your insurance, make sure you shop around to find a deal that’s right for your needs.

Visit the FCA’s for its guide Brexit: information for retail investments firms in the UK. {:target=”_blank”}

How do I find out where my product provider is based or authorised?

You can use the FCA’s Financial Services Register to find out where a financial services provider is based or authorised, and if your financial service provider is EEA authorised.

Deposit protection

Will the Financial Services Compensation Scheme (FSCS) continue to apply?

The existing FSCS protection framework continues to apply. However, FSCS protection for deposits will depend on several factors including where the firm is authorised and in which jurisdiction the firm holds your deposits.

When dealing with a firm from the European Economic area (EEA) that is seeking authorisation from the Prudential Regulation Authority (PRA) while in the TPR, it’s possible you may not be covered in the same way as a UK based firm when making a complaint or seeking compensation. Your provider should tell you if you are affected in any way. If you have any questions you should contact your firm directly for further information.

You’ll be able to find out if a firm you’re dealing with is in the TPR by checking the FCA’s Financial Services Register. It will clearly state this at the top of a firm’s page.

Alternatively you can find out more about the impact of the UK leaving the EU and the Financial Services Compensation Scheme on FSCS.org.uk and our Compensation if your bank or building society goes bust page.

I use a UK bank/building society/credit union in the UK. Will the FSCS continue to protect my money after 31 January 2020?

Yes. Eligible deposits held by UK-authorised banks, building societies and credit unions in the UK will continue to be protected by the FSCS, assuming the firm continues to be UK authorised.

FSCS protection is not dependent on where you’re living, but where the bank, building society or credit union holds your money. If a deposit is held by a branch in the UK, FSCS protection applies (unless it is a branch of a Gibraltar-based firm, in which case, protection would be the responsibility of the deposit guarantee scheme in Gibraltar).

Your bank, building society and credit union must give you an annual information sheet that describes your depositor protection. Check with your product or services provider for more information.

The FSCS has provided information on their website about what the UK’s withdrawal from the EU means for FSCS protection.

Will the FSCS deposit protection limit of £85,000 be affected?

The Financial Services Compensation Scheme (FSCS) provides compensation and protection to customers of authorised financial services firms that have failed.

There are no plans by the government to currently revise the FSCS deposit protection limit for UK-based customers of UK authorised firms. Your bank, building society and credit union are required to provide you with an annual information sheet that describes your depositor protection.

However, FSCS protection may change if a customer and/or their firm is based in the European Economic Area (EEA).

How will the value of my stock market investments and invested pension funds be affected?

It’s difficult to predict the impact on any individual investments because this can depend on several factors.

It’s possible there could be a short period of temporary market volatility, which might mean the value of your investments in the short term could rise or fall. Whether they fall or rise, and how much and how long, is difficult to predict.

If the value of your investments has fallen and you don’t require access to these funds in the immediate future, this may not be a big problem because markets are likely to recover over time.

However, if you’re planning to cash in any investments in the immediate future, we recommend getting professional advice as soon as possible.

Would UK providers still be able to provide financial services to UK nationals living in the EU and EEA?

The impact of the UK leaving the EU is that rules on whether banks can provide accounts to their customers who are resident in an EU/EAA country may change.

Different countries and different banks are taking different approaches.

These approaches will mean:

  • some countries will not allow UK banks to continue providing accounts to residents
  • some banks will be closing accounts for people who are EU residents
  • some banks will continue to serve EU residents with existing accounts, but will not allow new accounts.

What you can do

Your bank should contact you to let you know what they are planning to do. If you have any concerns about whether you might be affected, contact your provider.

If your UK bank account or other financial product is being closed these are the main options available:

  • Find a UK bank that is operating in the country you live and check you can meet their eligibility criteria for opening a new bank account and that the account will meet your needs. For example, does it require you to have a minimum income or deposit with them.
  • If you are still a UK resident, contact your bank to update your details and remove the non-UK address.
  • Consider setting up a pre-paid card or use an e-payment provider, however, these don’t come with FSCS £85,000 protection.
  • Find a local bank account that will accept payments from the UK. If you’re not eligible for one, ask them if they can offer you a basic bank account. It’s likely that you’ll have to get your pounds exchanged into Euros or local currency to pay into the account.

Make sure you understand the fees, charges and exchange rates for any account you set up. A UK State Pension, for example, can be paid into an overseas bank account, but the money you get will be subject to currency conversion.

Once you’ve set up your new account, double check you’ve correctly set up all the payment details both for payments ‘in’ and ‘out’.

Raising a complaint to the Financial Ombudsman Service

Can I complain to the Financial Ombudsman Service?

If you’re a UK customer of a UK firm, there should be no change to complaints the Financial Ombudsman Service (FOS) is able to look at.

However, if you’re a UK customer of an EEA firm that’s operating in the UK under the Temporary Permissions Regime (TPR), or under the Financial Services Contracts Regime (FSCR), your protections may be different.

The FSCR will enable EEA passporting firms that do not enter the TPR to wind down their UK business in an orderly fashion.

The FSCR will be time-limited depending on the type of regulated activity being performed. It will apply for:

  • a maximum of 15 years for insurance contracts, and
  • 5 years for all other contracts

These periods are maximum periods and a firm’s permission (or exemption) under FSCR applies only to the extent that it is necessary for the performance of a pre-existing contract plus certain limited specified activities.

You’ll be able to find out if a firm you’re dealing with is in the TPR by checking the FCA’s Financial Services Register. It will clearly state this at the top of a firm’s page.

Will my consumer rights and protection remain the same?

Your consumer rights and protections are based on existing EU directives which have been incorporated into UK law. This means your current protections and rights that you have for your financial products and services will not have changed unless the government decides to introduce new legislation.

Will I still be able to complain about a company based in the EU after Brexit?

This will depend on your circumstances. If the business is operating in the UK it should have joined the FCA’s Temporary Permissions Regime (TPR) or be part of the Financial Services Contract Regime (FSCR). If a company has joined The Pensions Regulator, then customers will still be able to refer complaints to the FOS.

Businesses in the FSCR that were previously in the Financial Ombudsman Service’s (FOS) jurisdiction should remain in the FOS jurisdiction.

More information about the financial services contracts regime (FSCR) – and specific information for consumers about dealing with financial businesses in the EEAopens in new window – is available on the FCA’s website.

If you’re unsure whether you can bring a complaint to the ombudsman service you can ask your financial services provider – or contact the FOS directly.

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